Monthly Payments Matter More Than Down Payments for First-Time Buyers

When first-time home buyers think about affordability, many picture the challenge of scraping together a down payment. But according to our Summer 2025 First-Time Home Buyer Survey, monthly mortgage payments are a bigger concern.

In the survey, 35.3% of buyers cited monthly payments as their top worry, compared with just 17.7% who said saving for a down payment was their main hurdle. With interest rates, property taxes, and insurance costs all on the rise, it’s no surprise that first-time buyers are laser-focused on what they’ll owe each month once they’re in their home.

Why monthly payments matter more than the down payment

A down payment is a one-time cost, but your monthly mortgage bill will be with you for years, often decades. That makes it the key factor in determining whether a home truly fits your budget.

First-time home buyers are especially sensitive to this because they often have less financial cushion. A too-high payment can lead to being “house poor,” where all your income goes to housing with little left for savings, emergencies, or lifestyle.

In other words: the down payment gets you in the door, but the monthly payment determines how comfortably you can stay there.

How interest rates change the equation

Interest rates are one of the biggest drivers of monthly cost, and they’ve been a top concern for 33.3% of buyers in our survey. Even a small rate shift can change affordability dramatically.

For example:

• At 6% interest: Your monthly principal and interest payment would be about $2,398.
• At 6.5% interest: That payment jumps to roughly $2,529.
• At 7% interest: You’d be paying around $2,661 each month.

That’s an increase of $263 per month between 6% and 7%, which adds up to over $31,500 over a 30-year loan.

For first-time home buyers, this illustrates why monthly payments often matter more than the down payment. Even a slightly higher rate can significantly affect what you can comfortably afford.

Balancing cash and comfort

This shift in priorities highlights the importance of flexibility. Many first-time buyers are opting for lower down payment programs such as FHA, VA, USDA, or even 3% down conventional loans to keep more cash on hand.

While a smaller down payment increases the loan amount, it can also preserve savings that buyers may need for closing costs, moving expenses, or unexpected repairs.

In today’s market, the smartest move isn’t always about putting down the most money upfront. It’s about structuring your loan in a way that makes your monthly budget sustainable.

Strategies to keep your monthly payment affordable

The good news is, you have more control over your monthly mortgage payment than you might think. By taking the right steps before and during the homebuying process, you can keep costs in check and avoid becoming house poor.

Here are some of the most effective strategies:

• Shop multiple lenders to compare rates and terms. Even small differences in interest rates can save hundreds per month.
• Explore loan programs like FHA, VA, or USDA, which may offer competitive rates and lower upfront costs.
• Buy discount points to reduce your interest rate for long-term savings.
• Adjust expectations by targeting a lower-priced home or moving to a more affordable location.
• Budget for taxes and insurance early, so you aren’t surprised later.

Each of these actions can directly lower your monthly payment or prevent unexpected increases, giving you more flexibility in your overall budget.

Down payment still matters but less than you think

That’s not to say the down payment isn’t important. A bigger down payment can lower your monthly bill by reducing your loan size and eliminating mortgage insurance. But waiting years to save 20% may not always pay off, especially if rates or home prices rise in the meantime.

The takeaway from our survey is clear: it’s often better to buy when your monthly payment fits your budget, rather than delaying homeownership just to reach a higher down payment target.

To see more insights from first-time buyers, including how they’re saving, what trade-offs they’re making, and what’s influencing their decisions, explore our full Summer 2025 First-Time Home Buyer Survey.